ACTION ITEMS ON THE MEND Before considering a broken condo deal, factor in these thoughts.
- Consider new acquisition avenues. Multifamily firms with experience in complex financial transactions may be able to negotiate directly with the lender of a failed conversion or take over the note for the property.
- Determine your willingness to deal with individual unit owners. Some firms aren’t interested in properties with any number of occupied units; others underwrite the deal to include buying such owners out. To avoid the legal fallout from a group of angry individual unit owners, research state liability laws.
- Compare various pricing methods. You need to determine an appropriate price for the asset and be prepared to work without cap rates. Depending on a variety of factors, the best way to value such an acquisition might be based on the expected internal rate of return or the price per door.
Remember the details. If you buy a property in mid-renovation, you may be able to get existing building materials for pennies on the dollar. Ask where these materials are stored and take possession of them if they are not on-site.Back on the MarketApproximately 331,000 apartment units were sold to condo converters during the condo conversion boom of 2004 to 2006, according to Real Capital Analytics. The firm says 31,500 of those units have reverted to rental apartment units.
